House Democrats Ask Steven Mnuchin to Provide Treasury Tax Analysis

Tax Bill Could Be Written Next Week

Official Side-by-Side Comparison of Tax Bills

White House Signals Flexibility on 20% Corporate Rate

Today in Taxes: Lawmakers Aim for Bill Next Week

Every day, we'll help you keep track of what just happened and what's next in the tax debate. Following along by selecting "Today in Taxes."

What Happened

Senate Republicans designated to sit on a House-Senate conference committee met informally late Thursday to set their strategy, aiming to narrow the list of differences on tax policy that need to be resolved. "What we're trying to do is keep it focused on that handful of things that they need to have," said Sen. John Thune (R., S.D.), referring to the needs of House Republican negotiators. "We think that it's a very finite list of issues."

In trying to resolve differences with House Republicans, Senate Republicans are focused on state and local tax deductions, the corporate alternative minimum tax, and the tax treatment of "pass-through" entities—the partnerships, limited liability companies and sole proprietorships that pay taxes at the rate imposed on individual owners. These are on the short list of items that represent the biggest differences between House and Senate bills.

Democrats say that they are being cut out of the final-stage negotiations. "I haven't see anything for months indicating that there would be a real debate, open discussion, something bipartisan and something resembling the way you really put together a bill," Mr. Wyden, the top Democrat on the Senate Finance Committee and one of the conferees, told reporters Thursday evening.

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House Republicans Push Back on Stock Tax in Senate Bill

Dozens of House Republicans are pushing back against a provision in the Senate’s tax bill that would cause investors to pay millions of dollars more in taxes.

In a letter to Senate leaders on Thursday, 41 House Republicans urged the lawmakers to drop the first-in, first-out provision that would govern how investment gains and losses are taxed when an investor sells part of a position.

The provision would prevent investors from minimizing taxes by choosing the specific shares that are being sold when they sell part of a position. Investors would instead have to sell their oldest shares first.

The lawmakers said the provision would amount to a “massive, fundamental change that inhibits investor autonomy.” They added that taxpayers should continue to be able to control the timing of their gains and losses by choosing which share lots to sell.

The letter from the Association of Equipment Manufacturers, which represents farm- and construction-equipment makers, warns that the "base-erosion anti-abuse tax" built into the Senate bill would result in double taxation for many companies with foreign operations.

The BEAT provision seeks to ensure that companies making significant payments to foreign affiliates pay a minimum of 10% in taxes on an alternative measure of income.

But that measure of income excludes tax deductions for foreign payments, and, some tax attorneys warn, also a variety of tax credits, including credit for taxes paid to foreign jurisdictions.

"We believe that an exemption or foreign tax credit for payments that are sufficiently taxed by foreign countries would address this problem and urge you to include this in the final bill," Dennis Slater, AEM's president, wrote in the letter Thursday.

AEM's 950 member companies include such large firms as Deere & Co., Caterpillar Inc. and Cummins Inc., as well as smaller and family-owned firms.

The BEAT applies to companies with more than $500 million in average gross receipts over three years and which claim deductions for cross-border payments that add up to 4% of the company's total deductions in a given year.

AEM also asked lawmakers to consider other changes to the BEAT, including exempting cross-border payments made where the U.S. and a foreign country have agreed on specific tax treatment, and allowing companies to reduce future-year taxes based on base-erosion taxes paid previously.

The House's tax-overhaul legislation proposes a simpler mechanism that effectively applies a 20% tax to certain cross-border payments. It, too, has generated opposition from a variety of companies and trade groups.

House Democrats Ask Steven Mnuchin to Provide Treasury Tax Analysis

Democrats on the tax-bill conference committee are asking Treasury Secretary Steven Mnuchin to appear to back up his claims about the bill's growth effects.

In a letter Thursday, the five House Democrats asked Mr. Mnuchin to provide the conference committee with a copy of the agency’s economic analysis of the tax plan and to appear before them, along with the director of Treasury’s Office of Tax Analysis, to explain their findings.

Mr. Mnuchin has repeatedly said a Treasury analysis shows the tax plan would generate enough economic growth to pay for itself, and at one point said it would pay down the debt. But the agency has never released the analysis to the public, and some Democrats have begun to question whether one exists at all.

The authors of the letter—Reps. Richard Neal of Massachusetts, Lloyd Doggett of Texas, Sander Levin of Michigan, Raul Grijalva of Arizona and Kathy Castor of Florida—pointed out that “numerous independent experts” have found the bill would not generate enough growth to offset its costs.

“We would like to hear from you as a witness from the administration to share your opposing views and supporting evidence,” they said.

A Treasury spokeswoman did not immediately respond to a request for comment.

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Tax Bill Could Be Written Next Week

The tax-bill conference committee hasn't formally met yet, but it could be done by the end of next week, said Sen. Rob Portman (R., Ohio).

Mr. Portman, who is on the 29-member committee, spoke to reporters after leaving a meeting with some other Senate Republican committee members Thursday afternoon.

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Official Side-by-Side Comparison of Tax Bills

The Joint Committee on Taxation has released its official comparison between the House and Senate tax bills.

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White House Signals Flexibility on 20% Corporate Rate

The Trump administration has previously said it wouldn't support tax legislation with a corporate tax rate of more than 20%. But that line in the sand may be getting a little squiggly.

Asked Thursday whether White House would accept increasing the corporate tax rate from a 20% level, which was approved by both the House and Senate, to 22%, White House press secretary Sarah Huckabee Sanders said the president is focused on getting "the lowest corporate rate possible."

She didn't rule out the president supporting a final bill with a 22% corporate rate. The current corporate rate stands at 35%.

"Fifteen [percent] is better than 20. Twenty is better than 22, and 22 is better than what we have," she said. "Again, we're going to continue to push but we're not going to negotiate that from the podium. And we're committed to getting the lowest corporate rate we can."

On International Tax, Ready, Set...Wait

The prospect of starting a new international corporate tax system in 25 days is a bit daunting, and lawmakers may give more time for companies to adjust and for the Treasury Department to write rules.

“Because the international provisions are complex, just by the nature…we’ve had industries ask for transition periods in certain areas,” Rep. Kevin Brady (R., Texas) chairman of the House Ways and Means Committee, told reporters Thursday. “Most of those requests, I think, are very fair.”

Mr. Brady, who will lead a House-Senate conference committee working out the differences between the two bills, said he hadn’t talked to his Senate colleagues yet about this issue. And he wasn’t specific about which provisions might get different start dates.

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The Eight States Best Represented on the Tax-Bill Conference Committee

Eight states—Utah, Texas, Alaska, Oregon, Michigan, Washington, Illinois and South Dakota—have at least two lawmakers on the 29-member conference committee that will be negotiating the final tax bill.

And a few of the most populous—New York, Georgia and North Carolina—have no one on the committee. The committee’s membership became final Thursday when Senate Democrats made their picks. It hasn't scheduled a first meeting yet.

Some of those members, in the House, will have limited influence. The representatives from the House Natural Resources Committee and the House Energy and Commerce Committee are there to consider only the narrow pieces of the bills in their panels’ jurisdictions.

Alaska’s representation from Rep. Don Young (R., Alaska) and Sen. Lisa Murkowski (R., Alaska) stems from the oil-drilling provision included in the bill.

In two cases, same-state members will be working at cross purposes. Sen. Ron Wyden (D., Ore.) and Rep. Greg Walden (R., Ore.) have very different views of the Affordable Care Act provisions under Mr. Walden’s jurisdiction. And Sen. John Cornyn (R., Texas) and Rep. Lloyd Doggett (D., Texas) almost couldn’t be farther apart on tax policy.

The conference agreement must be signed by a majority of House members and a majority of Senate members. If Republicans stick together, they can control the outcome.

House Speaker Paul Ryan (R., Wis.) opened the door to passing health-care legislation in the House similar to the bills that Sen. Susan Collins (R., Maine) reached an agreement to pass in the Senate as a condition for her support of the GOP tax bill.

But Mr. Ryan also made clear that he had not been part of the deal Ms. Collins had struck with Senate Majority Leader Mitch McConnell (R., Ky.) and President Donald Trump.

“I wasn’t part of those conversations,” Mr. Ryan told reporters about the agreement. "I'm not deeply familiar with those conversations."

Ms. Collins had raised concerns over the Senate GOP tax bill’s repeal of the individual mandate, the requirement established by the 2010 Affordable Care Act that most people have health-care insurance or pay a penalty.

So to get her on board with the tax bill, Mr. McConnell agreed to pass before the end of the year two bills to mitigate any ensuing rise in premiums, which Mr. Trump told Senate Republicans he would support.

A bill from Sens. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) would restore for two years payments to insurers that would help offset the cost of subsidies for low-income consumers. That bill has faced resistance in the House, where many conservatives view it as a bailout for insurers.

But Mr. Ryan suggested that the House might be open to passing some legislation responding to any consequences of repealing the individual mandate.

“She’s put some very productive, constructive solutions on the table,” Mr. Ryan said of Ms. Collins. “Our members are looking at the same kind of solutions,” he said, noting that the House GOP supported the Senate’s decision to repeal the individual mandate in the tax bill.

“In doing that, that’s going to invite new conversation about how we fix health care and I think that’s all productive.”

Ms. Collins is also pushing to pass legislation she introduced with Sen. Bill Nelson (D., Fla.) to help states set up programs that aid insurers with high-cost claims, which ultimately aims to lower premiums.

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Senate Democrats' Tax-Bill Conferees

Here are the Democratic senators chosen for the House-Senate conference committee:

President Donald Trump Aware Parameters Such as Corporate Rate Might ‘Have to Be Moved’ in Tax Bill, Adviser Says

One of the president’s top economic advisers said Thursday that White House officials are aware trade-offs may need to be made in the tax bill, and the corporate tax rate in particular, to ensure its passage.

“It could be 22% when it all comes out, but it could also be 20%,” the president said of the corporate rate.

Kevin Hassett, the chairman of the White House Council of Economic Advisers, said Thursday the kind of tradeoff the president talked about “is the kind of thing that, if we modeled it…it’s not necessarily undermining the positive economic effects of the bill.”

“The president has said what he said and I think that’s cognizant of the process that’s ongoing and the fact that some of those parameters might, now that we’re close to the end zone, have to be moved,” he said at a breakfast hosted by the American Council for Capital Formation.

“We’re precisely at the moment, social justice arguments would imply, it’s really crucial to keep the recovery going,” he said, noting that if tax cuts are enacted, workers could see bigger paychecks “probably by February.”

Today in Taxes: Naming the Last of the Negotiators

Every day, we’ll help you keep track of what just happened and what's next in the tax debate. Follow along by selecting "Today in Taxes."

What Happened

Senate Republicans announced their conference committee members late Wednesday: Sens. Orrin Hatch of Utah, Mike Enzi of Wyoming, Lisa Murkowski of Alaska, John Cornyn of Texas, John Thune of South Dakota, Rob Portman of Ohio, Tim Scott of South Carolina and Pat Toomey of Pennsylvania. The Senate also moved to start negotiating with the House committee members to combine their two tax bills into one. The next question is who will represent Senate Democrats.

Since public schools are mostly funded by local property taxes and state aid, the GOP plan to cap property-tax deductions at $10,000 and give no break for state and local income or sales taxes has led to concerns about school funding.

Senate Majority Leader Mitch McConnell (R., Ky.) endorsed an idea being pursued by California Republicans to allow taxpayers to choose between deducting up to $10,000 in property taxes or state and local income taxes. “That sounds like a kind of reasonable idea,” Mr. McConnell said.

One of the most-criticized pieces of the House tax bill—repealing the itemized deduction for medical expenses—may not survive in the final legislation. Lawmakers are re-examining this item.

The legislation, if enacted by Christmas as GOP leaders plan, could reduce government revenues early next year. This adds to the uncertainty around discussions over the debt limit, as a loss of revenue due to tax cuts could potentially draw the final deadline closer to extend the debt limit. We’re watching this, too.

Senate Majority Whip John Cornyn of Texas and GOP Sens. John Thune of South Dakota, Rob Portman of Ohio, Tim Scott of South Carolina and Pat Toomey of Pennsylvania were also selected to be on the conference committee. All are members of the Senate Finance Committee, which wrote the tax bill.

"I’m confident that this distinguished group of senators will work to get the job done for the American people," Mr. McConnell said in a statement Wednesday night. "I know everyone is ready to finalize our tax reform legislation and send it to the president so he can sign it into law.”

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A Potential First Since the Civil War: Tax Cuts for Whiskey Makers

Amid the Republican push for tax overhaul, the typically squabbling executives and lobbyists from the beer, wine and spirits sectors joined forces. They’re now celebrating the possibility of what they are calling their first federal tax reduction in roughly 150 years.

A Senate version of the proposed tax bill includes a two-year provision that would cut federal excise tax on alcohol makers. For instance, it would set a reduced excise tax rate of $2.70 per "proof gallon" that a booze maker must pay on the first 100,000 gallons of distilled spirits produced or imported annually. The current rate is $13.50 per proof gallon--a measurement of volume that takes into consideration alcohol content. For the next 22 million or so gallons, the rate would rise to $13.34, after which it would keep the current rate.

Different excise rate reductions and credits would also apply to wine- and beer-makers.

The biggest winners are smaller brewers, vintner or distillers, who because their volume is low, anyway, would benefit the most from the reduction in excise tax.

Robert Cassell, co-founder of Pennsylvania based New Liberty Distilling, estimates the tax cuts would give him an extra $50,000 to $80,000 a year to hire people and buy more equipment at his two distilleries in County Mayo, Ireland and Kensington, Pa. “This is like found money,” he said.

If passed, the bill would be the first cut to federal taxes for alcohol makers since the Civil War, according to Frank Coleman, public affairs head for the Distilled Spirits Council, which has led lobbying efforts for spirits makers in the U.S.

Earlier this summer, DISCUS brought about 50 spirits makers from around the country to Capitol Hill to meet with over 100 lawmakers. As members of the House and Senate confer on merging the two versions of their bills, the alcohol industry has been ramping up its outreach, organizing distillers to make dozens of phone calls and send emails to lawmakers and to visit in person.